SME Space

Investment in small entrepreneurs is critical for quality of life and poverty alleviation

The Small-Scale Sustainable Infrastructure Fund (S3IDF) is an international organisation which reduces poverty in developing countries by supporting small-scale enterprises that meet basic infrastructure needs and provide opportunities for economic advancement. DR HARISH HANDE, CHAIRMAN,S3IDF India offered SHRIKANT RAO a view of the role played by the company in supporting small and medium enterprises and entrepreneurs across India.

Take us through the genesis, nature and scope of the Small Scale Sustainable Infrastructure Development Fund (S3IDF)?

S3IDF is a not-for profit Section 25 (Section 8) company that started its operations in Bengaluru in 2002. Large scale infrastructure projects always tend to by-pass the poor and are never responsive to the poor’s needs. The founders of S3IDF realised the importance and potential of small scale infrastructure – especially when owned and run by the poor themselves – to be responsive to the poor’s needs. S3IDF therefore focusses on the small entrepreneur who runs small scale infrastructure businesses – such as those that provide lighting, water and sanitation, cooking and also those that meet productive end-use needs – for example drying of agriculture or aquaculture produce. S3IDF facilitates such entrepreneurship by (a) providing access to finance by linking them to banks and other FIs, (b) by enabling access to technology (c) by building capacity through mentoring and where appropriate on-ground support.

Give us a sense of some of the project and dissemination initiatives taken up by your organisation and the main areas of your focus?

More recently, S3IDF is supporting both urban and rural projects such as small scale electricity generation for poor households in remote hilly area and fluoride filters for communities at risk of fluorosis due to fluoride in water in the rural context, Integrated Energy centres, for lighting in slums, lighting for street hawkers and support for informal solid waste management entrepreneurs in the urban context. On the dissemination front, notably S3IDF is now the host of a network called “CLEAN” – or Clean Energy Access Network – a network that seeks to be the voice of energy practitioners helping solve the energy access problem in this country. The Network secretariat will work with various practitioners to help overcome the problems of the sector as a whole – through policy advocacy, training and skill building, technology standards and increasing access to finance.

Tell us about the role S3IDF has been playing in India in helping SMEs/MSMEs and individual entrepreneurs notably in the infrastructure/construction/manufacturing/equipment segment – and the nature of the support offered?

The commonality in all projects that S3IDF supports is a “local entrepreneur” who is overcoming challenges in the context of the poor communities. S3IDF believes that there is vast entrepreneurial talent in the country and small-scale entrepreneurship is critical to solving the infrastructure problems of the poor. S3IDF supports, mentors and overcomes access to finance and technology issues at the entrepreneur level while constantly trying to create appropriate encouraging and supporting eco-systems for these entrepreneurs. S3IDF gives importance to even the really small scale entrepreneurs – for example an entrepreneur providing daily rental lighting to 30-50 hawkers – which the rest of the world tends to ignore and discount with the argument that they cannot “scale”. S3IDF believes that the mass of the people out there have this level of entrepreneurial ability which needs to be nurtured. It is the collective force of these entrepreneurs which are important to solve our infrastructure problems.

Could you name some of your SME/MSME clients – and offer very brief case study of those who have approached you with problems and have benefited from the support offered by your organisation?

I can offer the examples of Prakruthi Renewable Power Private Limited, Nisarga Environment Technologies who develop, distribute and install micro/pico hydro technology. They have benefitted from enterprise financing from S3IDF – this is an example that fits into the usual interpretation of “SME/MSME”. However an equally important example I can offer is of Ramesh and Manjula from Bengaluru who provide lighting to approximately 100 street hawkers by using distribute solar-grid hybrid technology. They are a micro-enterprise, they do not know English and cannot write business plans. They have taken and repaid their loans and their business has survived the death of Ramesh with his wife Manjula running the entire business now. They are the kind of entrepreneurs that can solve problems of people like the street hawkers. The support they need is rarely considered by the mainstream world.

Give us an understanding of S3IDF’s Social Merchant Bank Approach?

The Social Merchant Bank Approach is unique because of the combination of services it provides and because of the kind of entrepreneur it provides these services to. The services S3IDF provides is (1) providing access to finance by linking them to banks & other FIs (if necessary S3IDF may stand guarantee to the loans provided by such FIs) (2) by enabling access to technology (3) by building capacity through mentoring and where appropriate on-ground support. The combination of all of these working together is what we call the Social Merchant Bank Approach.

What is your organisation doing to support women entrepreneurs?

Manjulas’ story above is a clear example of how women entrepreneurs get supported. When we look to solve infrastructure problems women entrepreneurs and women SHGs are a constituency we look at to help by providing our services. Many problems like cooking solutions (fuels, stoves etc), sanitation and sometime household based livelihoods are clearly women entrepreneur driven or benefits women directly. These are all problem areas we work in.

What is the extent of financial assistance offered by S3IDF for projects so far? Tell us of your strategic linkages with other groups, companies and financial institutions which help you maximize the realisation of your objectives? Could you name some of them?

S3IDF’s financial participation in any project is customised with two primary objectives: (i) to leverage money from local financial institutions – so our financial participation is typically a partial risk guarantee for a loan that a bank will give an entrepreneur (ii) to integrate and provide innovative gap-filling financing that helps cover gaps of what banks or other FIs may not do but is necessary so that it becomes affordable or matches the cash flow cycles of the poor. We have worked with multiple banks including nationalised for example, Syndicate Bank, rural regional banks like the erstwhile Pragathi Gramin Bank now Pragathi Krishna Gramin Bank and even farmer credit-cooperatives like Sharada Souharda Sahakari Sangha. We also have special strategic partnerships with technology companies like Selco Solar Light Pvt Ltd for solar technology, Prakruthi Renewable Power Pvt Ltd (for Pico/Micro hydro technology). We also have linkages with organisations like Hasiru Dala, a cooperative of informal sector solid waste workers, which gives access to communities in need of solutions.

What are the main challenges S3IDF as an organisation has to address in the course of its functioning and how are you dealing with them?

The biggest challenge is to get the world to see the importance of nurturing this kind of entrepreneurship. Investment in such entrepreneurs is critical for quality of life and poverty alleviation for the poor yet the world wants to invest only in entrepreneurs who can write good business plans that “can go to scale”. The world must also realise that this segment of human capital needs investment that is patient and does not create financial returns but has very high social impact. We must understand that for such an entrepreneur “return on investment” is a livelihood, not a financial concept. We deal with this challenge everyday and we believe the work on the ground should be the real demonstration of the importance of such investment.

Access to easy finance is a critical area for small enterprises because it comes with various qualifications and conditionalities. What is your organisation doing to make things easy for the sector and what are your requirements for offering support?

A very important focus of our organisation is the access to finance – and I have already explained the critical principles of our financing. While we participate financially in projects it must be stressed that we facilitate financing and “fill financing gaps” and try and create innovative financial solutions for the poor – for example, a milk cooperative doing solar light financing and using the milk collection process for repayment collection. Therefore the milk cooperative knows cash flows and creates a financing for the light that matches the cash flows. S3IDF stands guarantee so that the milk cooperative learns this whole process and then S3IDF is not necessary any more. We are not a “fund” in the traditional sense. We are more a facilitator.

Give us a sense of the emphasis placed by S3DIF on the environment and sustainable model for development?

All infrastructure solutions involved in the enterprises and projects supported by S3IDF must be environmentally and socially sustainable models for development – for example typically renewable energy solutions are deployed for energy services. Similarly a clear criteria for our participation is that the project needs to serve the poor and/or poor entrepreneurs.

What are your plans - and recommendations to the government - for raising the profile of support to the small enterprises sector?

Referring back to the example given earlier of the “CLEAN” network – the approach to raising the profile of support to the small enterprises will be to collectively work with practitioners of the sector to try and create a unified voice for the sector. CLEAN is a clear example which puts the different energy access practitioners/entrepreneurs at the heart of the profile raising process. It is through constant engagement with them, and their articulation of their problems and solutions that the CLEAN network hopes to become a unified voice of theirs thus leveraging their collective strength to achieve advocacy.

With finance being a grey zone to what extent does innovation help in furthering the SME/MSME cause? Will you cite some examples of innovation leading to growth of a small enterprise?

Innovation is the key to small enterprise growth. Innovation of products, services, communications and financing are necessary to achieve this. At the smallest level, an entrepreneur we supported who provides street hawkers lights innovated by realising an onion seller needs a different kind of light and an apple seller needs a different kind of light and was able to respond to the two needs differently. In the typical “SME/MSME” sense, Selco Solar Light Pvt Ltd, our strategic partner who shares our philosophy has demonstrated innovation of all kinds for their growth.

Tell us of the must do steps for the governments – both at the State and Centre – to draw small enterprises out of the low growth zone?

There should be more investment in needs assessment, research and development of technology and products and business incubation that is focused on the poor: Innovative partnership of academia, civil society organisations and business is necessary to achieve this. Educational institutions of various types must get involved and more human capital must be channeled into these problems. These processes must be co-creatives of value along with the poor engaging their entrepreneurship in the process. Parallely there must be more education and training of bankers and other financiers on various innovative technologies and innovative businesses that can emerge out of that process so that financing can be forthcoming.

SME Space

Investment in small entrepreneurs is critical for quality of life and poverty alleviation

The Small-Scale Sustainable Infrastructure Fund (S3IDF) is an international organisation which reduces poverty in developing countries by supporting small-scale enterprises that meet basic infrastructure needs and provide opportunities for economic advancement. DR HARISH HANDE, CHAIRMAN,S3IDF India offered SHRIKANT RAO a view of the role played by the company in supporting small and medium enterprises and entrepreneurs across India.

Take us through the genesis, nature and scope of the Small Scale Sustainable Infrastructure Development Fund (S3IDF)?

S3IDF is a not-for profit Section 25 (Section 8) company that started its operations in Bengaluru in 2002. Large scale infrastructure projects always tend to by-pass the poor and are never responsive to the poor’s needs. The founders of S3IDF realised the importance and potential of small scale infrastructure – especially when owned and run by the poor themselves – to be responsive to the poor’s needs. S3IDF therefore focusses on the small entrepreneur who runs small scale infrastructure businesses – such as those that provide lighting, water and sanitation, cooking and also those that meet productive end-use needs – for example drying of agriculture or aquaculture produce. S3IDF facilitates such entrepreneurship by (a) providing access to finance by linking them to banks and other FIs, (b) by enabling access to technology (c) by building capacity through mentoring and where appropriate on-ground support.

Give us a sense of some of the project and dissemination initiatives taken up by your organisation and the main areas of your focus?

More recently, S3IDF is supporting both urban and rural projects such as small scale electricity generation for poor households in remote hilly area and fluoride filters for communities at risk of fluorosis due to fluoride in water in the rural context, Integrated Energy centres, for lighting in slums, lighting for street hawkers and support for informal solid waste management entrepreneurs in the urban context. On the dissemination front, notably S3IDF is now the host of a network called “CLEAN” – or Clean Energy Access Network – a network that seeks to be the voice of energy practitioners helping solve the energy access problem in this country. The Network secretariat will work with various practitioners to help overcome the problems of the sector as a whole – through policy advocacy, training and skill building, technology standards and increasing access to finance.

Tell us about the role S3IDF has been playing in India in helping SMEs/MSMEs and individual entrepreneurs notably in the infrastructure/construction/manufacturing/equipment segment – and the nature of the support offered?

The commonality in all projects that S3IDF supports is a “local entrepreneur” who is overcoming challenges in the context of the poor communities. S3IDF believes that there is vast entrepreneurial talent in the country and small-scale entrepreneurship is critical to solving the infrastructure problems of the poor. S3IDF supports, mentors and overcomes access to finance and technology issues at the entrepreneur level while constantly trying to create appropriate encouraging and supporting eco-systems for these entrepreneurs. S3IDF gives importance to even the really small scale entrepreneurs – for example an entrepreneur providing daily rental lighting to 30-50 hawkers – which the rest of the world tends to ignore and discount with the argument that they cannot “scale”. S3IDF believes that the mass of the people out there have this level of entrepreneurial ability which needs to be nurtured. It is the collective force of these entrepreneurs which are important to solve our infrastructure problems.

Could you name some of your SME/MSME clients – and offer very brief case study of those who have approached you with problems and have benefited from the support offered by your organisation?

I can offer the examples of Prakruthi Renewable Power Private Limited, Nisarga Environment Technologies who develop, distribute and install micro/pico hydro technology. They have benefitted from enterprise financing from S3IDF – this is an example that fits into the usual interpretation of “SME/MSME”. However an equally important example I can offer is of Ramesh and Manjula from Bengaluru who provide lighting to approximately 100 street hawkers by using distribute solar-grid hybrid technology. They are a micro-enterprise, they do not know English and cannot write business plans. They have taken and repaid their loans and their business has survived the death of Ramesh with his wife Manjula running the entire business now. They are the kind of entrepreneurs that can solve problems of people like the street hawkers. The support they need is rarely considered by the mainstream world.

Give us an understanding of S3IDF’s Social Merchant Bank Approach?

The Social Merchant Bank Approach is unique because of the combination of services it provides and because of the kind of entrepreneur it provides these services to. The services S3IDF provides is (1) providing access to finance by linking them to banks & other FIs (if necessary S3IDF may stand guarantee to the loans provided by such FIs) (2) by enabling access to technology (3) by building capacity through mentoring and where appropriate on-ground support. The combination of all of these working together is what we call the Social Merchant Bank Approach.

What is your organisation doing to support women entrepreneurs?

Manjulas’ story above is a clear example of how women entrepreneurs get supported. When we look to solve infrastructure problems women entrepreneurs and women SHGs are a constituency we look at to help by providing our services. Many problems like cooking solutions (fuels, stoves etc), sanitation and sometime household based livelihoods are clearly women entrepreneur driven or benefits women directly. These are all problem areas we work in.

What is the extent of financial assistance offered by S3IDF for projects so far? Tell us of your strategic linkages with other groups, companies and financial institutions which help you maximize the realisation of your objectives? Could you name some of them?

S3IDF’s financial participation in any project is customised with two primary objectives: (i) to leverage money from local financial institutions – so our financial participation is typically a partial risk guarantee for a loan that a bank will give an entrepreneur (ii) to integrate and provide innovative gap-filling financing that helps cover gaps of what banks or other FIs may not do but is necessary so that it becomes affordable or matches the cash flow cycles of the poor. We have worked with multiple banks including nationalised for example, Syndicate Bank, rural regional banks like the erstwhile Pragathi Gramin Bank now Pragathi Krishna Gramin Bank and even farmer credit-cooperatives like Sharada Souharda Sahakari Sangha. We also have special strategic partnerships with technology companies like Selco Solar Light Pvt Ltd for solar technology, Prakruthi Renewable Power Pvt Ltd (for Pico/Micro hydro technology). We also have linkages with organisations like Hasiru Dala, a cooperative of informal sector solid waste workers, which gives access to communities in need of solutions.

What are the main challenges S3IDF as an organisation has to address in the course of its functioning and how are you dealing with them?

The biggest challenge is to get the world to see the importance of nurturing this kind of entrepreneurship. Investment in such entrepreneurs is critical for quality of life and poverty alleviation for the poor yet the world wants to invest only in entrepreneurs who can write good business plans that “can go to scale”. The world must also realise that this segment of human capital needs investment that is patient and does not create financial returns but has very high social impact. We must understand that for such an entrepreneur “return on investment” is a livelihood, not a financial concept. We deal with this challenge everyday and we believe the work on the ground should be the real demonstration of the importance of such investment.

Access to easy finance is a critical area for small enterprises because it comes with various qualifications and conditionalities. What is your organisation doing to make things easy for the sector and what are your requirements for offering support?

A very important focus of our organisation is the access to finance – and I have already explained the critical principles of our financing. While we participate financially in projects it must be stressed that we facilitate financing and “fill financing gaps” and try and create innovative financial solutions for the poor – for example, a milk cooperative doing solar light financing and using the milk collection process for repayment collection. Therefore the milk cooperative knows cash flows and creates a financing for the light that matches the cash flows. S3IDF stands guarantee so that the milk cooperative learns this whole process and then S3IDF is not necessary any more. We are not a “fund” in the traditional sense. We are more a facilitator.

Give us a sense of the emphasis placed by S3DIF on the environment and sustainable model for development?

All infrastructure solutions involved in the enterprises and projects supported by S3IDF must be environmentally and socially sustainable models for development – for example typically renewable energy solutions are deployed for energy services. Similarly a clear criteria for our participation is that the project needs to serve the poor and/or poor entrepreneurs.

What are your plans - and recommendations to the government - for raising the profile of support to the small enterprises sector?

Referring back to the example given earlier of the “CLEAN” network – the approach to raising the profile of support to the small enterprises will be to collectively work with practitioners of the sector to try and create a unified voice for the sector. CLEAN is a clear example which puts the different energy access practitioners/entrepreneurs at the heart of the profile raising process. It is through constant engagement with them, and their articulation of their problems and solutions that the CLEAN network hopes to become a unified voice of theirs thus leveraging their collective strength to achieve advocacy.

With finance being a grey zone to what extent does innovation help in furthering the SME/MSME cause? Will you cite some examples of innovation leading to growth of a small enterprise?

Innovation is the key to small enterprise growth. Innovation of products, services, communications and financing are necessary to achieve this. At the smallest level, an entrepreneur we supported who provides street hawkers lights innovated by realising an onion seller needs a different kind of light and an apple seller needs a different kind of light and was able to respond to the two needs differently. In the typical “SME/MSME” sense, Selco Solar Light Pvt Ltd, our strategic partner who shares our philosophy has demonstrated innovation of all kinds for their growth.

Tell us of the must do steps for the governments – both at the State and Centre – to draw small enterprises out of the low growth zone?

There should be more investment in needs assessment, research and development of technology and products and business incubation that is focused on the poor: Innovative partnership of academia, civil society organisations and business is necessary to achieve this. Educational institutions of various types must get involved and more human capital must be channeled into these problems. These processes must be co-creatives of value along with the poor engaging their entrepreneurship in the process. Parallely there must be more education and training of bankers and other financiers on various innovative technologies and innovative businesses that can emerge out of that process so that financing can be forthcoming.